We welcome first time guest blogger Joseph A. DiRuzzo, III. Joe’s practice is based in South Florida; however, he handles cases throughout the country and in the United States Virgin Islands. Joe regularly represents litigants pro bono before the Tax Court and before the Courts of Appeal. Joe tilts at some of the same jurisdictional windmills as the tax clinic at Harvard. Keith

One of the main points of contention is whether the filing of an income tax return with the Virgin Islands tax authority starts the running of the statute of limitations for the IRS to assess (the details of that analysis are beyond this blog).

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With that in mind, I turn to the Tax Court’s January 29th fully reviewed decision in Coffey v. Comm’r, 150 T.C. No. 4 (Jan. 29, 2018). The Coffey opinion has an opinion by Judge Holmes, an opinion by Judge Thornton, and a dissenting opinion by Chief Judge Marvel.

Judge Holmes’ opinion was joined by Foley, Vasquez, Gustafson, and Buch, JJ.; Judge Thornton’s opinion was joined by Gale, Goeke, Paris, Kerrigan, Pugh, and Ashford, JJ., and with Judge Gustafson (with the exception as to the word “only” in the first line of the concurring opinion and the phrase “if not the reasoning” in the last sentence of the concurring opinion). Chief Judge Marvel’s dissenting opinion was joined by Morrison, Lauber, and Nega, JJ.

Questions in the wake of Coffey?

Frankly, I have no idea how to read the Coffey opinion, as the Tax Court has not indicated how to read fractured full division decisions, nor do the Tax Court’s rules shed any light on the matter. As I see it, the Tax Court entered a 5-7-4 decision, but leaves open the following questions:

Does Judge Holmes’ opinion carry the day when it had only 5 judges signing on to it?

Shouldn’t Judge Thornton’s opinion be the controlling since it had 7 judges signing on to it?

Judge Gustafson voted twice, i.e., he signed on to both the Holmes and the Thornton opinions. Is that possible? If so, does one vote weigh more heavily than the other?

Marks expresses the Supreme Court’s view on how to determine which opinion is controlling when there is no majority opinion in its decisions. But, Marks is often difficult to apply, has been subject to much criticism, and has never explicitly been stated by the Tax Court as governing the interpretation of its own opinions (perhaps with good reason).

Marks v. United States

For those that are unfamiliar, the Marks decision set forth how one is to interpret a Supreme Court decision where there is no majority decision. Grossly over-simplified, Marks stands for the proposition that the opinion that votes for the outcome of the case decided on the “narrowest grounds” is the controlling opinion. As one jurist has put it, the D.C. Circuit has

interpreted Marks to mean that, to be binding as representing the narrowest grounds for decision, an opinion must represent a common denominator of the Court’s reasoning it must embody a position implicitly approved by at least five Justices who support the judgment. (emphasis added). Under Marks’ “narrowest grounds” approach, for an opinion to be controlling it must contain a “controlling rationale.” “Marks is workable … only when one opinion is a logical subset of other, broader opinions.” Otherwise, the en banc court reasoned, “[i]f applied in situations where the various opinions supporting the judgment are mutually exclusive, Marks will turn a single opinion that lacks majority support into national law.” So, “[w]hen … one opinion supporting the judgment does not fit entirely within a broader circle drawn by the others, Marks is problematic.” According to the en banc court, Marks applies when “the concurrence posits a narrow test to which the plurality must necessarily agree as a logical consequence of its own, broader position.” (emphasis added).

The Tax Court has never cited to, let alone analyzed, the Marks decision. Accordingly, I have recently filed a motion asking the Tax Court to inform the Tax bar how to interpret its fractured decision (this would apply to all fractured decisions, not just the Coffey decision). A copy of the motion is available here (ignore the title on the coversheet as there isn’t a “miscellaneous” option on the drop down lists when selecting the type of motion (much to my chagrin)).

In my motion, I make the following arguments why Marks does not apply to the Tax Court’s interpretation of its own decisions (in contrast to the Supreme Court’s decisions).

The “narrowest grounds” approach is a means to interpret case law, not statutes. Thus, to the extent that there is a tension between “strict construction doctrine” and the “narrowest grounds” the Tax Court must employ the “strict construction doctrine” to determine which opinion is most taxpayer friendly.

The Supreme Court did not hold in Marks that lower court fractured decisions (i.e., Court of Appeals or the Tax Court) are subject to Marks. Marks was limited to Supreme Court decisions and has not been expanded to trial courts.

The animating reasoning behind Marks is vertical stare decisis and lower courts’ obligations to follow Supreme Court rulings. While the Tax Court has taken the position that its rulings published in T.C. volumes are precedents that must be followed by other Tax Court judges until reversed by the court sitting en banc; see Lawrence v. Comm’r, 27 T.C. 713, 718 (1957) (“The Tax Court has always believed that Congress intended it to decide all cases uniformly . . . “); there is nothing in the Tax Court’s authorizing statutes that suggests and/or requires that result. Other trial courts, such as district courts and the Court of Federal Claims, do not purport to issue precedential rulings, and their judges are free to disagree with each other — only being required to follow controlling Supreme Court or appellate court authority. If there is no Tax Court majority opinion in an en banc reviewed opinion, does it accord with Marks’ purposes that any judge is bound to follow any particular Tax Court plurality opinion? Further, because vertical stare decisis cannot work on the Tax Court’s own case law, Marks is inapplicable to the Tax Court.

There are times when splintered decisions have no “narrowest” opinion that would identify how a majority of a court (e.g. the Supreme Court or the Tax Court) would resolve all future cases.

The Golsen Rule would wreak havoc if the Tax Court were to adopt Marks. That is so, because the Courts of Appeals “cases interpreting Marks have not been a model of clarity,” United States v. Davis, 825 F.3d 1014, 1021 (9th Cir. 2016), and the Tax Court would have to interpret Marks via extant circuit case law to determine how the Tax Court is to read its own fractured precedent. Such would simply be unworkable. This is especially so given that there is a circuit-split regarding how to apply Marks as the D.C. Circuit and the Ninth Circuit have taken a “logical-subset” approach, while the others used a “results-oriented” test.

1. Whether this Court’s decision in Marks means that the concurring opinion in a 4-1-4 decision represents the holding of the Court where neither the plurality’s reasoning nor the concurrence’s reasoning is a logical subset of the other.

2. Whether, under Marks, the lower courts are bound by the four-Justice plurality opinion in Freeman, or, instead, by Justice Sotomayor’s separate concurring opinion with which all eight other Justices disagreed.

3. Whether, as the four-Justice plurality in Freeman concluded, a defendant who enters into a Fed. R. Crim. P. 11(c)(1)(C) plea agreement is generally eligible for a sentence reduction if there is a later, retroactive amendment to the relevant Sentencing Guidelines range.

Thus, even the Supreme Court has recognized that the Marks decision needs some clarification.

If the Tax Court desires to issue rulings which the American public can tell what the law is in respect to the omnipresent Internal Revenue Code, it must create a bright-line rule, which Marks does anything but.

Conclusion

In my humble opinion, the case law interpreting Marks is a mess, and the Tax Court should not import such a mess into its jurisprudence. So where does that leave us? Well, only time will tell how the Tax Court decides my motion. At a minimum, I hope that this blog will kick-start the discussion on this issue amongst the Tax bar (I anticipate this issue will arise again because it appears that fully reviewed opinions have become more common). If anyone wants to file an amicus in my case, please contact me so I can give you IRS counsel’s contact information.

The fracture between the Holmes opinion and the Thornton opinion is even more problematic because each opinion results in a different ASED. That is why Judge Gustafson’s attempt to join both opinions “in full” is just weird. Marks is really of limited help to the Tax Court here. So long as the IRS has attempted to act beyond the later of the two possible ASEDs, the decision can work. But the push will come shoving when the IRS acts with the ASED as calculated by the Holmes opinion but at a time that would be outside the ASED as calculated by the Thornton opinion.

I don’t know how aggressively the Service is pursuing VI taxpayers so I have no idea if that fact pattern will actually arise.

Finally, don’t get too excited by finding some cases that tell you to interpret tax statutes in favor of the government. You can find an equal number that tell you the opposite. I wrote about that (with cites) in my Tax Notes article “Presumptions and Tax Return Preparer Fraud,” 120 Tax Notes 167 (July 14, 2008), available here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1186582

Good write up. I will just have to think more on the main topic. Thanks.

I have one comment on a side issue. You state

Does Judge Thornton’s opinion (which is the most taxpayer friendly) control since it is well settled that courts interpret revenue laws in favor of the taxpayer—a principle known as the “strict construction doctrine.” Bowers v. N.Y. & Albany Lighterage Co., 273 U.S. 346, 350 (1927); see also Royal Caribbean Cruises, Inc. v. United States, 108 F.3d 290, 294 (11th Cir. 1997) (“This interpretation is consistent with the general rule of construction that ambiguous tax statutes are to be construed against the government and in favor of the taxpayer.”).

I suspect that hese related maxims probably are minims in this context, but I don’t think that in applying an ambiguous statute courts default to the most taxpayer-friendly construction.

Chevron teaches that ambiguous statutes, including tax statutes, can be interpreted by the IRS to eliminate the ambiguity via Chevron or Skidmore. There is no default to the most taxpayer-friendly interpretation simply because of statutory ambiguity which is the statutory requirement for Chevron Step Two.

And, more to the point, courts interpret ambiguous statutes, including tax statutes, all the time when the agency, including the IRS, has not supplied the interpretation. Indeed in the Chevron context, if the Court at Step Two finds the IRS’s interpretation of the ambiguous statute is unreasonable, it can then adopt its own reasonable interpretation of the statute based on the traditional tools of statutory construction. I don’t think courts just default to the most taxpayer-friendly interpretation simply because of statutory ambiguity.

If courts did so default, there would be something like the rule of lenity which only applies in criminal cases.

I suppose the maxims-minims may be assuming that the statutory ambiguity continues to exist after the tools of statutory construction are rigorously applied so that the court is unable to make any reasonable interpretation of the statute. However, I doubt that that phenomenon exists in many cases.

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Leslie Book

Keith Fogg

T. Keith Fogg is a Clinical Professor of Law at Harvard Law School where he started a tax clinic in 2015. Prior to joining the faculty at Harvard, he began his academic career at Villanova Law School in 2007 after working for over 30 years with the Office of Chief Counsel, IRS. Read More…

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